Insurers want ban on no win no fee and referrals

With the average cost of insuring a vehicle in the UK has risen to £1,000 a year, insurance companies have stepped up their call for a ban of no win no fee arrangements and referral fees paid to ‘ambulance-chasing’ legal firms.

The Government has already taken steps to reform personal injury compensation cases in the civil courts. Both growing fraud and higher numbers of personal injury claims through solicitors specialising in no win no fee arrangements have also been blamed for the rampant increase in insurance premiums.

Justice Secretary Kenneth Clarke recently put forward a proposal that those who enter into a no win no fee arrangement with their legal representation should not be eligible to recoup their court costs if they prevail in their case. Instead these claimants will be required to pay the ‘success fees’ of their lawyers out of any compensation awards they may receive.

The rationale behind the proposal was to act as a deterrent for the majority of people seeking damages after an RTA. The last major overhaul of the compensation system was the Access to Justice Act in 1999, which was instituted by the Labour government in order to allow the recovery of success fees from the defendants in civil cases.

Those legal professionals that specialise in no win no fee schemes will be barred from using certain language in their adverts, while a cap of £200 will be placed on referral fees, which are kickbacks given to law firms by third parties for referring the personal details of someone injured in a road traffic accident in a bid to generate business. Some industry bodies – such as the Association of British Insurers – would prefer a complete ban on the activity.